Unformatted text preview: 5. Interest rate parity: F = S ((1+drf)/(1+frf)). The forward premium or discount is f(d,p) = (F – S)/S 6. Covered interest arbitrage forces interest rates towards parity. Ex. Of a currency where spot and forward FX rates are same but cash rates are different. 7. Currency hedging strategies: Unhedged, Cross hedge Standard hedge and proxy hedge. 8. Homework problems: Done in class 9. End of chapter problems: 6, 7, 9, 10, 12...
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- Spring '12
- Forward contract, Benchmark currency positions, International Bond Portfolio Management, fully hedged portfolios